Should I Refinance My Student Loans?

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Personal Finance, Student Loans

Student loan refinancing means swapping your current student loans for a new loan with a lower interest rate. That could save you big money over time. Unlike refinancing a mortgage, refinancing student loans is free. There are no fees or hidden costs.

Whether you should refinance student loans depends on your situation. You should refinance your student loans if:

  • You would save money. There is no reason to refinance your loans unless you end up paying less in interest. Use the student loan refinancing calculator below to find out how much you could save.
  • You can qualify. You — or a co-signer — generally need a credit score at least in the high 600s and enough income to consistently pay your debts and other expenses.
  • Your finances are stable. If you refinance, your federal loans won’t be eligible for income-driven repayment and loan forgiveness. Think twice about refinancing your federal loans if it’s likely you won’t be able to make payments consistently.

Student loan refinance calculator

Note: This calculator assumes that after you refinance, you’ll make minimum monthly payments.

How much will refinancing save me?

You can potentially save tens of thousands of dollars throughout the life of your loan by refinancing:

  • You can get a lower monthly payment, freeing up cash for other expenses.
  • You can pay off your loan faster, saving you money in interest.

Refinancing student loans doesn’t cost money. There are generally no origination, application or prepayment fees. But read your loan agreement carefully to make sure you understand costs you could incur in the future, like late fees.

If you decide to refinance, compare multiple lenders to see who offers you the best rate. If you have similar offers, give greater weight to lenders who offer the most flexibility with payments and the longest possible forbearance options.

Will I qualify for student loan refinancing?

Student loan refinance lenders’ requirements vary, but you’ll have a good shot a qualifying if you:

  • Have good credit. At a minimum, you’ll need a score in the high 600s. Many borrowers who are approved for refinancing have FICO scores in the 700s.
  • Have enough income to afford your expenses. Lenders consider your total income and your debt-to-income ratio, which is the amount of money you owe relative to your income. Current debt-to-income ratio may have less effect on borrowers who have high future earnings potential. Student loan refinancing is popular among doctors, dentists, pharmacists, lawyers and MBA graduates.

If you don’t meet the credit and income requirements for refinancing, you may still qualify if you apply with a co-signer who does.

Start saving (a ton) on your student loans